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Execution across businesses

Tata Power reported Q1FY27 EBITDA (including regulatory deferral income) of INR38.6bn, up 8% YoY and 8% ahead of our estimates, led by performance in the rooftop solar business and TP Solar (cell & module manufacturing). The EBITDA mix remained well diversified, with T&D contributing ~35%, thermal generation ~25%, and renewables ~40%. Management indicated that growth momentum is expected to continue across businesses and reiterated its FY27 guidance of commissioning 2.5– 2.7GW of renewable capacity along with 60–70% revenue growth in the rooftop solar segment. The company also maintained its FY27 capex guidance of INR250bn, with ~20% already deployed in Q1FY27. On the Mundra project, approvals for the supplementary PPA are progressing as expected, with approvals from three states likely in August and the remaining state in September. Despite its sizable capex pipeline, the balance sheet remains manageable, with net debt-to-underlying EBITDA at 3.41x and net debt-to-equity at 1.25x. Following the better-than-expected performance, we raise our FY27/FY28 EBITDA estimates by 2–3% and revise our target price to INR414 (earlier INR400). We upgrade the stock to Accumulate from Hold, implying an upside potential of ~11%.

Decent Quarter:

Q1FY27 consolidated revenue (without other income) increase 6% YoY, was driven by strong performance in distribution, rooftop solar, renewables and power trading, partially offset by lower thermal generation. Reported PAT (pre-minority) however grew 11% YoY to INR14 bn, supported Higher EBITDA from regulated and renewable businesses, coupled with operating leverage and an exceptional gain, drove the increase in reported PAT during Q1FY27. Excluding this one-off, underlying earnings growth would have been more modest. Debt stands at INR632bn with net debt/EBITDA at 3.4x and net debt/equity at 1.25x.

Rooftop Solar Emerges as a Key Growth Driver:

Solar rooftop remained the standout performer in Tata Power's portfolio, delivering ~100% YoY revenue growth, while EBITDA and PAT increased by ~50-60% and >60% YoY, respectively, reflecting improving operating leverage and execution efficiency. Management reiterated its confidence of sustaining the growth trajectory, guiding for 60-70% revenue growth in FY27, driven by healthy traction under the PM Surya Ghar Yojana, rising C&I demand and increasing battery storage adoption. The company highlighted the significant untapped opportunity, with only ~4 mn rooftop installations against nearly 250 mn electricity consumers in India, implying a long growth runway. Leveraging its integrated ecosystem spanning domestic cell & module manufacturing, EPC execution, financing solutions and an extensive pan-India channel network, Tata Power expects to strengthen its leadership position and increase market share from ~13% to ~25% over the medium term. Company also indicated that the INR300 bn revenue aspiration could be achieved ahead of schedule, reinforcing its view that the rooftop business will emerge as one of the largest contributors to Tata Power's renewable earnings and a key driver of long-term value creation.

Renewable Pipeline Underpins Long-Term Growth:

Tata Power continues to strengthen its renewable growth platform through disciplined capacity expansion and sustained capital investments. The company reiterated its target of commissioning 2.5-2.7 GW of renewable capacity during FY27, which will increase its operational renewable portfolio from 6.7 GW to over 9 GW by year-end. While commissioning was impacted by temporary transmission evacuation constraints during the quarter, management highlighted that nearly 500 MW is ready for synchronization, with execution expected to accelerate from 2QFY27 onwards. The company invested INR53 bn during 1QFY27 and maintained its INR250 bn FY27 capex guidance, with nearly 50% allocated towards renewable energy projects and the balance directed towards transmission, distribution and pumped hydro assets. Backed by an integrated clean energy portfolio of ~17.7 GW (operational + under construction), Tata Power remains well positioned to capitalize on India's accelerating energy transition, where renewables accounted for 86% of the country's capacity additions during Q1FY27.

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